Strength in hidden numbers

When Stream International was eye-spying locations for a new call center
a couple of years ago, it decided on Kalispell, Mont. Although unemployment
in Flathead County was higher than state and national averages, Stream
was nonetheless hoping to hire as many as 1,000 workers over time in an
area boasting a civilian workforce of under 40,000.

The firm's original employment projection was to hire 500 people over
three years, starting in April 2000. "We did that in the first three
months," said a company recruiter, who asked not to be named, and
the firm currently has about 750 employees. While a labor shortage is
on the lips of many in the state, an official at the Montana Department
of Labor and Industry noted, "we didn't hear [Stream] complain"
about having enough applicants to choose from.

In fact, it's a common story, even in very tight labor markets. Two years
ago, a new call center looking for workers and paying $10 to $14 an hour
in Huron, S.D., was "overwhelmed" with applications. The company
originally planned to hire 300 workers within five years, but was already
at 225 after two years, despite a local unemployment rate typically under
4 percent.

In Devils Lake, N.D., a local farm equipment manufacturer was looking
to add up to 15 new workers in positions paying $10 to $15 an hour. "They
never had to advertise" to fill those positions, according to Jim
Dahlen, executive director of the Forward Devils Lake Area Development
Corp. Despite a local unemployment rate of about 3.5 percent, a new company
paying decent wages in Devils Lake doesn't have to look far for interested
workers.

"We find that [to be the case] time after time if we bring in a company
that pays well," Dahlen said. "In our community, we don't have
a labor shortage, we have labor underemployment."

Will work for different job

The recession in some parts of the district has made the labor shortage
seem like a distant memory. Earlier this year, half of all Wisconsin counties
had unemployment rates of more than 8.3 percent, including most of the
counties that lie in the Ninth District.

But despite the recession, labor shortages are still a major concern for
many businesses and regions throughout the Ninth District (see article,
"Mr. Recession, meet Mr. Labor
Shortage" in the May fedgazette). And as businesses and
communities are becoming more accustomed to the labor shortage, so too
are they discovering that low unemployment masks true labor availability
in many markets.

Many employers can still find the employees they need, and by the carload
in some places, even where the unemployment rate gives the impression
that few are available. In most cases, these workers come from other employers.
Such workers are typically underemployed or are skill mismatched in their
current job.

The underemployed are those with more skills than required for the job
and those working part-time involuntarily because full-time work is not
available. (Some studies include other traits that qualify a worker as
underemployedlike wage or job dissatisfactionthat were not
generally considered in this analysis.)

Skill mismatches occur when workers are employed in a job or occupation
different than the one they have trained for or have skills that don't
align with new job opportunities being created. One Montana contact said
there was a skill mismatch among many unemployed workers in the southwestern
part of the state because they have not adjusted their work skills "as
the Montana economy transitions out of a natural resource economy."

The Bismarck-Mandan region is seeing the labor trifecta of low unemployment,
worker shortages (for both low- and high-skill jobs) and underemployment,
according to a survey last year of area residents and employers. With
an annual unemployment rate of less than 3 percent in the region for several
years running, the survey found that employers were having difficulty
recruiting high-skill workers like engineers and experienced managers.

But employers were also having trouble filling spots for customer service
reps, unskilled manufacturing laborers and health care support staff.
They also reported high demand for many low-skill occupations for the
upcoming year. At the same time, 15 percent of workers reported being
underemployed. Almost two of five adult workers have bachelor's or advanced
degrees, and another 40 percent have some education or training beyond
high school.

As if on cue, close to half of the employers said it was "common"
for them to receive applications from people with higher education levels
than what an advertised position requires. "The area has a low unemployment
rate compared to the rest of the country, but employers can find qualified
employees in many occupations at prevailing wage and salary levels,"
the report concluded.

Whip cream or sprinkles, Caesar?

When a college graduate in English settles for a job in a coffee shop,
that person is generally considered to be both underemployed (the job
does not require a college education) and skill mismatched (because the
college degree was supposed to lead to a job in the publishing industry,
not retail sales).

When long-term unemployment is high, people are happy to have a job, even
if they aren't particularly excited about the one they have. But when
unemployment is low and job growth is strongas it is through much
of the district, despite the recessionfootloose workers can find
other jobs more easily that offer better pay, benefits, work environment,
a shorter commute or many other attractions.

For their part, businesses and communities are getting a more sophisticated
understanding of prevailing wages and skills among the current workforce
and capitalizing on restless workers who are ready and willing to jump
at the next-best opportunity. Some local economic development organizations
are even tapping into the concept of underemployment as a marketing tool,
particularly where local unemployment rates are low.

In 2000, unemployment in the Watertown, S.D., area was about 3 percent.
That year, the local economic development group commissioned a workforce
"verification" report from a firm normally consulted by large
corporations for site selection of new facilities. But the task was the
same: Find out the number of available workersemployed and unemployedfor
potential new employment.

The report looked at a nine-county area and concluded that there was an
available labor pool of 6,600 already-employed individuals, along with
an unemployment count of 1,000 people, interested in a new job. About
one-third of this group would do so for less than $9 an hour, and half
could be enticed at $10.25 an hour or less. It also found that 35 percent
of the underemployed labor force had some education or training beyond
high school, and 15 percent had a college degree.

"All in all, these details portray ... a presently available workforce
which new and existing companies can tap to satisfy their labor requirements,"
the report said.

Such efforts are being replicated across the district. A cursory search
for studies looking at labor availability and skill-matching uncovered
about two dozen such reports in district states, some more detailed than
others. Minnesota, for example, awarded $700,000 in grants for nine regional
projects to identify and evaluate the underemployed workforce and to help
design programs to address this underutilized labor.

With the notable exception of Sioux Falls, virtually all of the larger
cities in North and South Dakota have conducted labor-related studies
in the last year or two. Several South Dakota cities recently commissioned
a joint study on labor availability. Brookings was one of them, taking
part in the survey "to contradict the perception that the participating
communities are fully employed," said Dick Smith, executive director
of the Brookings Economic Development Corp., via e-mail. The multicounty
region was found to have an available labor force of almost 9,200 individuals
interested in changing or accepting employment, which Smith said translated
into "a plentiful labor supply, consisting of significant numbers
of underemployed as well as [those with] mismatched skills."

With an unemployment rate of only 2 percent in Brookings County as recently
as February, Smith said he's "successfully" used the survey
several times to help employers better understand the labor market there.
Rapid City conducted a similar survey and used it to recruit a labor-intensive
business, according to Smith.

Smaller communities are finding other ways to help employers track available
labor. For example, blind ads are published in the local newspaper in
rural Roberts County, in the northeastern corner of South Dakota, to provide
feedback on the number of individuals likely to respond to a job opening.
Despite a countywide population of just 10,000, the recent start-up of
an ethanol plant there offering 20 to 25 "better-paying" jobs
attracted upwards of 300 applications, according to a local source.

In Ashley, a sleepy town of just 900 in rural south-central North Dakota,
a "very preliminary" survey was conducted to check available
labor for a call center for jobs paying $7 an hour with minimal benefits.
Approximately 200 applications were received, many from people who indicated
that such a job would be in addition to their current jobthis despite
an average resident age in McIntosh County of about 57 years old, according
to Becky Meidinger, Ashley city coordinator.

Fishing for jobs

But for those that can afford them, formal laborshed or labor availability
studies are the newest, shiny tool in the toolbox for economic development
groups. Many communities have already conducted them in the past year
or two, and many more appear to be following. With funding help from the
North Dakota Department of Commerce, 14 cities there conducted a survey
of underemployment that will cover two-thirds of all counties. Cumulative
findings are due out in mid- to late June (after fedgazette deadlines).

"We have a lot of underemployment, and I think this survey will show
that," said Jim Hirsch, director of the Workforce Development Division.
Low unemployment statewide "takes us off the radar screen" for
companies looking for a place to expand or relocate, Hirsch said. "The
only way to counteract that is with hard data. ... We see [labor studies]
as crucial" for economic development groups trying to entice businesses
to the state.

Shawn Lyons, executive director of the Greater Huron Development Corp.
agreed that laborshed studies "seem to be the catch-phrase of the
day." When pursuing a potential employer, a similar study done for
Huron "is one of the first things we pull out."

Previously, the city had lost the competition for several companies looking
to expand or relocate. It offered an attractive package of incentives,
but was losing out to other cities offering similar incentives as well
as a labor availability study that "could prove independently that
[a region] had labor."

Lyons added that statistics gathered by the state "are of limited
use" because they often can't account for small anomalies that can
significantly alter supposed business activity in and around Huron, a
city of 12,000. For example, the state measured job loss and creation
at the county level in 2000 and found that Beadle County (Huron's home)
had lost 200 jobs.

That didn't square with Lyons, because a new call center had just come
to town. Upon checking into the matter, Lyons discovered that the jobs
created by the call center were credited to Sioux Falls, because that's
where the company was headquartered. That realization "kicked off"
the drive to study the city and regional laborshed, according to Lyons.

The study found that about one-quarter of its adult population was "potentially
available," and about 4,300 people were willing to change or accept
a new job. "There is no question about people having a mismatch of
jobs" in the Huron area, particularly for educated females, Lyons
said. Of those employed and willing to change employers, almost 60 percent
were women, who also had, on average, much higher education attainment
than their male counterparts.

Oftentimes that means people are looking far and wide to upgrade their
job. The Huron study found "there's a large regional pull of people
from 40 to 50 miles trying to find good jobs." Lyons said.

That's an attractive lure for the city to dangle in front of potential
employers, though not all local businesses are thrilled over the idea
of adding more competition in the battle for workers. "We went through
that discussion" with local firms about their workers getting pilfered
by new companies, Lyons said. "There were skeptics ... there's no
question. It doesn't matter if you're in Minneapolis or Huron, S.D."

Fortunately, he said, the Huron region has "a very supportive business
community" that used the study to improve its own hiring practices
and rethink prevailing wages and benefits.

Because of the costseveral thousand to tens of thousands of dollarssome
communities appear to balk at the idea of doing regular updates of the
local labor surveys. But Lyons said that if the city is able to attract
"another two or three" larger employers come to the area, "we'll
gladly do another survey because it'll prove it [the first one] was worthwhile."